Transcript Assignment 22
Secured Transactions Assignment 22
Maintaining Perfection Through Lapse and Bankruptcy
1
The Big Picture
Part Two: The Creditor Third Party Relationship Chapter 6: Perfection Chapter 7: Maintaining Perfection Assignment 22: Through lapse and bankruptcy Assignment 23: Through changes in name, identity and use of collateral Assignment 24: Through interstate movements of debtors and collateral Chapter 8-9: Priority 2
The Big Picture
Part Two: The Creditor Third Party Relationship Chapter 6: Perfection Chapter 7: Maintaining Perfection Assignment 22: Through lapse and bankruptcy Assignment 23: Through changes in name, identity and use of collateral Assignment 24: Through interstate movements of debtors and collateral Chapter 8-9: Priority 3
The Big Picture
Part Two: The Creditor Third Party Relationship Chapter 6: Perfection Chapter 7: Maintaining Perfection Assignment 22: Through lapse and bankruptcy Assignment 23: Through changes in name, identity and use of collateral Assignment 24: Through interstate movements of debtors and collateral Chapter 8-9: Priority 4
The Big Picture
Part Two: The Creditor Third Party Relationship Chapter 6: Perfection Chapter 7: Maintaining Perfection Assignment 22: Through lapse and bankruptcy Assignment 23: Through changes in name, identity and use of collateral Assignment 24: Through interstate movements of debtors and collateral Chapter 8-9: Priority 5
The Lapse Problem
RE recording system UCC filing system
6
The Lapse Problem
RE recording system
Adds documents, never removes documents
UCC filing system
7
The Lapse Problem
RE recording system
Adds documents, never removes documents 1. Mortgage
UCC filing system
8
The Lapse Problem
RE recording system
Adds documents, never removes documents 1. Mortgage 2. Satisfaction of mortgage
UCC filing system
9
The Lapse Problem
RE recording system
Adds documents, never removes documents 1. Mortgage 2. Satisfaction of mortgage
UCC filing system
May physically destroy documents after six years 10
The Lapse Problem
RE recording system
Adds documents, never removes documents 1. Mortgage 2. Satisfaction of mortgage
UCC filing system
May physically destroy documents after six years 1. Financing statement 11
The Lapse Problem
RE recording system
Adds documents, never removes documents 1. Mortgage 2. Satisfaction of mortgage
UCC filing system
May physically destroy documents after six years 1. Financing statement 2. Termination statement 12
The Lapse Problem
RE recording system
Adds documents, never removes documents 1. Mortgage 2. Satisfaction of mortgage
UCC filing system
May physically destroy documents after six years 1. Financing statement 2. Termination statement Automatic termination at five years 13
The Lapse Problem
RE recording system
Adds documents, never removes documents 1. Mortgage 2. Satisfaction of mortgage
UCC filing system
May physically destroy documents after six years 1. Financing statement 2. Termination statement Automatic termination at five years, so: 3. Continuation statement (at approximately five year intervals) 14
Basic Concepts
Temporary (automatic) perfection:
15
Basic Concepts
Temporary (automatic) perfection:
General rule: Perfection by possession “continues only while the secured party retains possession.” §9-313(d) 16
Basic Concepts
Temporary (automatic) perfection:
General rule: Perfection by possession “continues only while the secured party retains possession.” §9-313(d) Exception: Secured party who “makes goods available” for “ultimate sale” remains perfected for 20 days. §9-312(f).
17
Basic Concepts
Temporary (automatic) perfection:
General rule: Perfection by possession “continues only while the secured party retains possession.” §9-313(d) Exception: Secured party who “makes goods available” for “ultimate sale” remains perfected for 20 days. §9-312(f).
Searcher on goods has three tasks: 18
Basic Concepts
Temporary (automatic) perfection:
General rule: Perfection by possession “continues only while the secured party retains possession.” §9-313(d) Exception: Secured party who “makes goods available” for “ultimate sale” remains perfected for 20 days. §9-312(f).
Searcher on goods has three tasks: 1. Search filings 2. Examine goods for possession 19
Basic Concepts
Temporary (automatic) perfection:
General rule: Perfection by possession “continues only while the secured party retains possession.” §9-313(d) Exception: Secured party who “makes goods available” for “ultimate sale” remains perfected for 20 days. §9-312(f).
Searcher on goods has three tasks: 1. Search filings 2. Examine goods for possession 3. Determine if goods were possessed in previous 20 days 20
Basic Concepts
Temporary perfection/bankruptcy:
Schwinn Cycling case 21
Basic Concepts
Temporary perfection/bankruptcy:
Schwinn Cycling case Bailee perfected by possession 22
Basic Concepts
Temporary perfection/bankruptcy:
Schwinn Cycling case Bailee perfected by possession Bailee surrenders possession 23
Basic Concepts
Temporary perfection/bankruptcy:
Schwinn Cycling case Bailee perfected by possession Bailee surrenders possession 20 days Deadline to perfect §9-312(f) A perfected security interest in a negotiable document or goods in the possession of a bailee . . . remains perfected for 20 days without filing if the secured party makes available to the debtor the goods or documents representing the goods for the purpose of (1) ultimate sale or exchange; or (2) . . . otherwise dealing with them . . . preliminary to their sale or exchange.
24
Basic Concepts
Temporary perfection/bankruptcy:
Schwinn Cycling case Bailee perfected by possession Bailee surrenders possession Deadline to perfect 20 days
Bankruptcy
§9-312(f) A perfected security interest in a negotiable document or goods in the possession of a bailee . . . remains perfected for 20 days without filing if the secured party makes available to the debtor the goods or documents representing the goods for the purpose of (1) ultimate sale or exchange; or (2) . . . otherwise dealing with them . . . preliminary to their sale or exchange.
25
Basic Concepts
Temporary perfection/bankruptcy:
Schwinn Cycling case Bailee perfected by possession Bailee surrenders possession Deadline to perfect
Now
20 days
Bankruptcy
§9-312(f) A perfected security interest in a negotiable document or goods in the possession of a bailee . . . remains perfected for 20 days without filing if the secured party makes available to the debtor the goods or documents representing the goods for the purpose of (1) ultimate sale or exchange; or (2) . . . otherwise dealing with them . . . preliminary to their sale or exchange.
26
Basic Concepts
Temporary perfection/bankruptcy:
Schwinn Cycling case Bailee perfected by possession Bailee surrenders possession Deadline to perfect
Now
20 days
Bankruptcy
§9-312(f) A perfected security interest in a negotiable document or goods in the possession of a bailee . . . remains perfected for 20 days without filing if the secured party makes available to the debtor the goods or documents representing the goods for the purpose of (1) ultimate sale or exchange; or (2) . . . otherwise dealing with them . . . preliminary to their sale or exchange.
27 Bailee should have filed!
Basic Concepts
9-210(b).
[A] secured party . . . shall comply with a request within 14 days after receipt: 28
Basic Concepts
9-210(b). [A] secured party . . . shall comply with a request within 14 days after receipt: (2) in the case of a request regarding a list of collateral or a request regarding a statement of account, by authenticating and sending to the debtor an approval or correction.
29
Basic Concepts
Authenticated request with collateral list Authenticated approval or correction 14 days 9-210(b). [A] secured party . . . shall comply with a request within 14 days after receipt: (2) in the case of a request regarding a list of collateral or a request regarding a statement of account, by authenticating and sending to the debtor an approval or correction.
30
Basic Concepts
Authenticated request with collateral list Authenticated approval or correction 14 days 9-210(b). [A] secured party . . . shall comply with a request within 14 days after receipt: (2) in the case of a request regarding a list of collateral or a request regarding a statement of account, by authenticating and sending to the debtor an approval or correction.
This is the only (non-contract) obligation for secured to furnish information 31
Basic Concepts
Authenticated request with collateral list Authenticated approval or correction 14 days 9-210(b). [A] secured party . . . shall comply with a request within 14 days after receipt: (2) in the case of a request regarding a list of collateral or a request regarding a statement of account, by authenticating and sending to the debtor an approval or correction.
This is the only (non-contract) obligation for secured to furnish information Only the debtor may make a request.
32
Basic Concepts
Authenticated request with collateral list Authenticated approval or correction 14 days 9-210(b). [A] secured party . . . shall comply with a request within 14 days after receipt: (2) in the case of a request regarding a list of collateral or a request regarding a statement of account, by authenticating and sending to the debtor an approval or correction.
This is the only (non-contract) obligation for secured to furnish information Only the debtor may make a request.
on behalf of the searcher.
The debtor can request 33
12/30/01
Problem 22.1, page 392
7/7/06 CS FS a.
Bank filed financing statement 12/30/01, continuation statement 7/7/06. 34
12/30/01
Problem 22.1, page 392
7/7/06 CS FS a.
Bank filed financing statement 12/30/01, continuation statement 7/7/06. Was it timely?
35
12/30/01
Problem 22.1, page 392
12/30/06 7/7/06 5 years CS FS 6 mo.
a.
Bank filed financing statement 12/30/01, continuation statement 7/7/06. Was it timely? Yes, in last six months, §9-515(d).
36
12/30/01
Problem 22.1, page 392
12/30/06 7/7/06 3/22/10 5 years CS Today FS 6 mo.
a.
Bank filed financing statement 12/30/01, continuation statement 7/7/06. Was it timely? Yes, in last six months, §9-515(d).
37
12/30/01
Problem 22.1, page 392
12/30/06 7/7/06 3/22/10 5 years CS Today FS 6 mo.
a.
b.
Bank filed financing statement 12/30/01, continuation statement 7/7/06. Was it timely? Yes, in last six months, §9-515(d).
When is the next continuation statement due? 38
12/30/01
Problem 22.1, page 392
12/30/06 7/7/06 3/22/10 12/30/11 6/30/11 5 years CS 5 years CS FS 6 mo.
6 mo.
a.
b.
Bank filed financing statement 12/30/01, continuation statement 7/7/06. Was it timely? Yes, in last six months, §9-515(d).
When is the next continuation statement due?
12/30/11, §9-515(d) 6/30/11 to 39
12/30/01 FS
Problem 22.1, page 392
12/30/06 7/7/06 3/22/10 12/30/11 6/30/11 5 years CS 5 years Bky CS 6 mo.
6 mo.
a.
b.
c.
Bank filed financing statement 12/30/01, continuation statement 7/7/06. Was it timely? Yes, in last six months, §9-515(d).
When is the next continuation statement due? 6/30/11 to 12/30/11, §9-515(d) Does a 3/29/10 bankruptcy change your advice? 40
Problem 22.1, page 392
c. Does bankruptcy change your advice (to file a continuation statement between 6/30/11 and 12/30/11)? 41
Problem 22.1, page 392
c. Does bankruptcy change your advice (to file a continuation statement between 6/30/11 and 12/30/11)? §362(a)(4). [A] petition . . operates as a stay . . of . . any act to create, perfect or enforce any lien against property of the estate.
42
Problem 22.1, page 392
c. Does bankruptcy change your advice (to file a continuation statement between 6/30/11 and 12/30/11)? §362(a)(4). [A] petition . . operates as a stay . . of . . any act to create, perfect or enforce any lien against property of the estate.
§362(b)(3). The filing of a petition . . . does not operate as a stay . . . of any act to perfect, or to maintain or continue the perfection . . . to the extent that the trustee’s rights . . . are subject to such perfection under section 546(b) . . . 43
Problem 22.1, page 392
c. Does bankruptcy change your advice (to file a continuation statement between 6/30/11 and 12/30/11)? §362(a)(4). [A] petition . . operates as a stay . . of . . any act to create, perfect or enforce any lien against property of the estate.
§362(b)(3). The filing of a petition . . . does not operate as a stay . . . of any act to perfect, or to maintain or continue the perfection . . . to the extent that the trustee’s rights . . . are subject to such perfection under section 546(b) . . . §546(b)(1)(B). The rights . . . of a trustee . . . are subject to any generally applicable law that . . . provides for the . . . continuation of perfection of an interest in property to be effective against an entity that acquires rights . . . before the
Problem 22.1, page 392
c. Does bankruptcy change your advice (to file a continuation statement between 6/30/11 and 12/30/11)? No §362(a)(4). [A] petition . . operates as a stay . . of . . any act to create, perfect or enforce any lien against property of the estate.
§362(b)(3). The filing of a petition . . . does not operate as a stay . . . of any act to perfect, or to maintain or continue the perfection . . . to the extent that the trustee’s rights . . . are subject to such perfection under section 546(b) . . . §546(b)(1)(B). The rights . . . of a trustee . . . are subject to any generally applicable law that . . . provides for the . . . continuation of perfection of an interest in property to be effective against an entity that acquires rights . . . before the
Problem 22.2, page 392
Now 5 years Note due FS No continuation statement was filed. 46
Problem 22.2, page 392
Now 5 years Note due FS No continuation statement was filed. Was continuation our job or the client’s job?
47
Problem 22.2, page 392
Now 5 years Note due Was continuation our job or the client’s job?
FS No continuation statement was filed. Barnes v. Turner, 606 S.E. 2d 849 (Ga. 2004).
48
Problem 22.2, page 392
Now 5 years Note due Was continuation our job or the client’s job?
FS No continuation statement was filed. Barnes v. Turner, 606 S.E. 2d 849 (Ga. 2004). We do not, as the dissent contends, demand that the lawyer “ascertain the full extent of the client's 'objectives;’ only that the lawyer take reasonable, legal steps to fulfill the client's main, known objective -- to be paid for the business he sold. . . .” 49
Problem 22.2, page 392
Now 5 years Note due FS No continuation statement was filed.
1.
Should we file a continuation statement now?
50
Problem 22.2, page 392
Now 5 years Note due FS No continuation statement was filed.
1.
Should we file a continuation statement now? No. §9 510(c).
51
Problem 22.2, page 392
Now 5 years Note due FS No continuation statement was filed.
1.
Should we file a continuation statement now? No. §9 510(c). 2.
File a financing statement now?
52
Problem 22.2, page 392
Now 5 years Note due FS No continuation statement was filed.
1.
2.
Should we file a continuation statement now? No. §9 510(c). File a financing statement now? Ask debtor’s permission?
53
Problem 22.2, page 392
Now 5 years Note due FS No continuation statement was filed.
1.
Should we file a continuation statement now? No. §9 510(c). 2.
File a financing statement now? Ask debtor’s permission?
9-509(b). By authenticating . . . a security agreement, a debtor . . . authorizes the filing of
an
initial financing statement . . . covering the collateral described . . . .” 54
Problem 22.2, page 392
FS 5 years Now Note due §1-106(1). [U]nless the context otherwise requires . . . words in the singular number include the plural.
. .
No continuation statement was filed.
1.
Should we file a continuation statement now? No. §9 510(c). 2.
File a financing statement now? Ask debtor’s permission?
9-509(b). By authenticating . . . a security agreement, a debtor . . . authorizes the filing of
an
initial financing statement . . . covering the collateral described . . . .” 55
Problem 22.3, page 392
Associates files 9 years Ryerson files Bky Now Ryerson filed first and is supposed to have the first.
56
Associates possesses
Problem 22.3, page 392
Associates files 9 years Ryerson files Bky Now Ryerson filed first and is supposed to have the first. §9-322(a) 57
Associates possesses
Problem 22.3, page 392
Associates files 9 years Ryerson files Bky Now Ryerson filed first and is supposed to have the first. §9-322(a) How could Associates possess a traveling circus?
58
Associates possesses
Problem 22.3, page 392
Associates files 9 years Ryerson files Bky Now Ryerson filed first and is supposed to have the first. §9-322(a) How could Associates possess a traveling circus? Example: Allied Van Lines had the circus in trucks and authenticated record saying they held for Associates?
59
Associates possesses
Problem 22.3, page 392
Associates files 9 years Ryerson files Bky Now Ryerson filed first and is supposed to have the first. §9-322(a) a. How could Associates possess a traveling circus? Example: Allied Van Lines had the circus in trucks and authenticated record saying they held for Associates?
b. Parker right?
60
Associates possesses
Problem 22.3, page 392
Associates files 9 years Ryerson files Bky Now Ryerson filed first and is supposed to have the first. §9-322(a) a. How could Associates possess a traveling circus? Example: Allied Van Lines had the circus in trucks and authenticated record saying they held for Associates?
b. Parker right? §9-308(c). “A security interest . . . is perfected continuously if it is originally perfected by one method under this article article, and is later perfected by another method under this without an intermediate period when it was unperfected.” 61
Associates possesses
Problem 22.3, page 392
Associates files 9 years Ryerson files Bky Now Ryerson filed first and is supposed to have the first. §9-322(a) a. How could Associates possess a traveling circus? Example: Allied Van Lines had the circus in trucks and authenticated record saying they held for Associates?
b. Parker right? §9-308(c). “A security interest . . . is perfected continuously if it is originally perfected by one method under this article and is later perfected by another method under this article, without an intermediate period when it was unperfected.” 62 c. How will you do the closing next time? Evidence?
Associates possesses
Problem 22.3, page 392
Associates files 9 years Ryerson files Bky Now Ryerson filed first and is supposed to have the first. §9-322(a) a. How could Associates possess a traveling circus? Example: Allied Van Lines had the circus in trucks and authenticated record saying they held for Associates?
b. Parker right? §9-308(c). “A security interest . . . is perfected continuously if it is originally perfected by one method under this article and is later perfected by another method under this article, without an intermediate period when it was unperfected.” 63 c. How will you do the closing next time? Evidence? §9-339?
Problem 22.5, page 393
Firstbank: Security agreement: “12 fork lifts” Authorized financing statement: “Equipment” Fork lifts Equipment Drill presses 64
Problem 22.5, page 393
Firstbank: Security agreement: “12 fork lifts” Authorized financing statement: “Equipment” Does Firstbank have a security interest in the drill presses? Fork lifts Equipment Drill presses 65
Problem 22.5, page 393
Firstbank: Security agreement: “12 fork lifts” Authorized financing statement: “Equipment” Does Firstbank have a security interest in the drill presses? No.
Fork lifts Equipment Drill presses 66
Problem 22.5, page 393
Firstbank: Security agreement: “12 fork lifts” Authorized financing statement: “Equipment” Does Firstbank have a security interest in the drill presses? No.
a. Does Firstbank have to give a release?
Fork lifts Equipment Drill presses 67
Problem 22.5, page 393
Firstbank: Security agreement: “12 fork lifts” Authorized financing statement: “Equipment” Does Firstbank have a security interest in the drill presses? No.
a. Does Firstbank have to give a release? No. Authorized FS.
Fork lifts Equipment Drill presses 68
Problem 22.5, page 393
Firstbank: Security agreement: “12 fork lifts” Authorized financing statement: “Equipment” Does Firstbank have a security interest in the drill presses? No.
a. Does Firstbank have to give a release? No. Authorized FS.
b. Can Beaver borrow on the drill presses?
Fork lifts Equipment Drill presses 69
Problem 22.5, page 393
Firstbank: Security agreement: “12 fork lifts” Authorized financing statement: “Equipment” Does Firstbank have a security interest in the drill presses? No. a. Does Firstbank have to give a release? No. Authorized FS.
b. Can Beaver borrow on the drill presses?
Firstbank files “equipment” 2 nd bank files “drill presses,” SA, lends” 70
Problem 22.5, page 393
Firstbank: Security agreement: “12 fork lifts” Authorized financing statement: “Equipment” Does Firstbank have a security interest in the drill presses? No. a. Does Firstbank have to give a release? No. Authorized FS.
b. Can Beaver borrow on the drill presses?
Firstbank files “equipment” Firstbank gets SA in drill presses and lends 2 nd bank files “drill presses,” SA, lends” 71
Problem 22.5, page 393
§9-322(a)(1). Conflicting perfected security interests . . . rank according to priority in time of filing or perfection. Priority dates from the earlier of the time a filing covering the collateral is first made or the security interest . . . is first perfected . . . .
Firstbank files “equipment” 2 nd bank files “drill presses,” SA, lends” Firstbank gets SA in drill presses and lends Who’s first? §9-322(a)(1) 72
Problem 22.5, page 393
§9-322(a)(1). Conflicting perfected security interests . . . rank according to priority in time of filing or perfection. Priority dates from the earlier of the time a filing covering the collateral is first made or the security interest . . . is first perfected . . . .
Firstbank files “equipment” 2 nd bank files “drill presses,” SA, lends” Firstbank gets SA in drill presses and lends Who’s first? §9-322(a)(1) Will §9-210 help?
73
Problem 22.5, page 393
§9-322(a)(1). Conflicting perfected security interests . . . rank according to priority in time of filing or perfection. Priority dates from the earlier of the time a filing covering the collateral is first made or the security interest . . . is first perfected . . . .
Firstbank files “equipment” Firstbank “No SI” 2 nd bank files “drill presses,” SA, lends” Firstbank gets SA in drill presses and lends Who’s first? §9-322(a)(1) Will §9-210 help?
74
Problem 22.7, page 394
Global New Lender Termination $407K Suarez Bill of sale Termination $600K $550K Buyer Termination Would the Suarezs be better off under the UCC rule?
75
Problem 22.7, page 394
Global New Lender Termination $407K Suarez Bill of sale Termination $600K $550K Buyer Termination Would the Suarezs be better off under the UCC rule?
UCC §9-513(c). [W]ithin 20 days after a secured party receives an authenticated demand . . . the secured party shall . . . send to the debtor a termination statement . . . if (1) . . . there is no obligation secured by the collateral . . . and no commitment to make an advance . . . .
76
Problem 22.7, page 394
Global New Lender Termination $407K Suarez Bill of sale Termination $600K $550K Buyer Termination Would the Suarezs be better off under the UCC rule?
UCC §9-513(c). [W]ithin 20 days after a secured party receives an authenticated demand . . . the secured party shall . . . send to the debtor a termination statement . . . if (1) . . . there is no obligation secured by the collateral . . . and no commitment to make an advance . . . .
Payment and demand 20 days Termination 77
Problem 22.7, page 394
Global New Lender Termination $407K Suarez Bill of sale Termination $600K $550K Buyer Termination Would the Suarezs be better off under the UCC rule?
UCC §9-513(c). [W]ithin 20 days after a secured party receives an authenticated demand . . . the secured party shall . . . send to the debtor a termination statement . . . if (1) . . . there is no obligation secured by the collateral . . . and no commitment to make an advance . . . .
Demand 20 days Payment and termination 78
Problem 22.7, page 394
Global New Lender Termination $407K Suarez Bill of sale Termination $600K $550K Buyer Termination 9-509(d). A person may file an amendment . . . only if . . . (2) the amendment is a termination statement . . . the secured party . . . failed to file or send . . . as required by Section 9 513(c), the debtor authorizes the filing , and the termination statement indicates that the debtor authorized it to be filed.
79
Problem 22.7, page 394
Global New Lender Termination $407K Suarez Bill of sale Termination $600K $550K Buyer Termination 9-509(d). A person may file an amendment . . . only if . . . (2) the amendment is a termination statement . . . the secured party . . . failed to file or send . . . as required by Section 9 513(c), the debtor authorizes the filing, and the termination statement indicates that the debtor authorized it to be filed . [Otherwise, it is ineffective. 9-510(a).] 80
Problem 22.7, page 394
Global New Lender Termination $407K Suarez Bill of sale Termination $600K $550K Buyer Termination 9-509(d). A person may file an amendment . . . only if . . . (2) the amendment is a termination statement . . . the secured party . . . failed to file or send . . . as required by Section 9 513(c), the debtor authorizes the filing, and the termination statement indicates that the debtor authorized it to be filed. [Otherwise, it is ineffective. 9-510(a).] If you are New Lender, is this termination statement acceptable?
81